Speak to your financial advisor before you decide on which tax regime you wish to be a part of. Also, there is no clarity on whether this is a reversible decision – meaning whether you can get back to the old tax regime after you have opted for the new one.
Earlier today, Finance Minister Nirmala Sitharaman delivered the Budget 2020 speech, which, at two-and-a-half hours, is reportedly the longest budget speech till date.
While various industry experts are now sitting together to dissect this budget and see how it will impact the economy, in this article, we will try and understand how the budget 2020 will affect us, regular folks.
Key takeaways on income tax:
While the headlines speak of an income tax rate cut across slabs (the new rates are given below), please note that the new regime is optional and is not applicable to everyone. You can choose to stay with the old regime, including all exemptions (House Rent Allowance, 80 C, medical insurance etc.) or elect to fall under the new regime and lose all exemptions.
The new regime rates are as below:
• No income tax payable for annual income of up to Rs 5 lakh.
• For income between Rs 5 lakh and Rs 7.5 lakh, a 10 per cent tax will be levied. This has been revised from the previous 20 per cent income tax.
• 15 per cent tax for income between Rs 7.5 lakh and Rs 10 lakh.
• For income between Rs 10 lakh and Rs 12.5 lakh, 20 per cent tax will be applicable.
• For those with annual income between Rs 12.5 lakh and Rs 15 lakh, an income tax of 25 per cent, will be applicable.
• 30 per cent income tax on annual income of more than Rs 15 lakh (no change).
Word of caution: There is no clarity on whether this is a reversible decision–meaning, whether you can get back to the old tax regime after you have opted for the new one. So, speak to your financial advisor before you decide on which tax regime you wish to be a part of.
• Bank deposits of up to Rs 5 lakh are now insured. Previously the amount insured was Rs 1 lakh.
• The government plans to sell its part stake in Life Insurance Corporation (LIC), and it will become a listed company.
• Rs 69,000 crore will be allocated for the Jan Aarogya Yojna, which is aimed at improving the health care systems in India.
• The Dividend Distribution Tax (DDT) will be removed. Companies need not pay DDT and dividends be taxed only at the hands of the recipient.
• Increase in turnover limit from Rs 25 crore to Rs 100 crore for startups.
• Rs 4,400 crore has been allocated for ‘Clean Air Projects.’ This is to encourage states to formulate and implement plans to ensure clean air.
• 100 airports to be developed by 2024.
• Five new smart cities to be developed.
• Tobacco and cigarettes will cost more in the new financial year.
• Higher duty to be imposed on imported footwear and furniture.
• The corporate tax for existing companies has been reduced to 22 per cent. This is the lowest in the world.
• The government to look at setting up solar panels on barren lands.
• A tribal museum will be set up in Ranchi, Jharkhand.
• Rs 2,500 crore has been proposed for development of Tourism sector.
• New PAN shall be instantly allotted on the basis of Aadhaar.
This is only a brief gist of some of the announcements in the Budgets. As with everything, the devil lies in the details and the budget will be analysed and understood better over the next days.
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